Umbrella!

Umbrella Insurance Basics

Here's an excellent article, entitled "Protect your family from lawsuits even if you aren't rich" in USAToday. It has statistics and information that are valuable to the discussion on Personal Umbrella Policies.

Most of us think that a personal umbrella insurance policy is excessive - and there's no need for it. But when we look at our liability and lawsuits, the total expenses add up pretty quickly. If you are concerned about protecting your income or future income, your assets, or your future inheritance, you ought to be consider an umbrella policy.

It is my recommendation that everyone consider an umbrella policy because it inexpensively adds significant coverage – and it will cover some things that would otherwise not be covered in the underlying policy.

Six sample Scenarios...

Tom's 22-year-old son repairs neighborhood bicycles from the garage during the summers. Both the premises liability risk and the completed operations/products liability risk are probably uninsured. Homeowners policies exclude business-related lawsuits.

Bill works occasionally from home (telecommutes). His homeowners policy excludes injuries to those who come on the premises for business purposes. (Like a courier or UPS delivery person who falls on Bill's icy driveway while delivering a business package.)

Joe is 80 years old. He has no car and no longer drives, but he occasionally needs to be driven by others to doctor appointments, shopping, etc. Under principal/agency statutes and caselaw, Joe can be sued if his driver causes an accident, but Joe has no personal auto insurance policy and therefore no coverage.

You have a company-furnished vehicle and no other personal automobile. Your employer has broad form DIC coverage for her use of nonowned vehicles. But the business auto policy contains the usual exclusion for injuries your client causes to coworkers riding with her (i.e., the fellow-employee exclusion).

You own a tractor and often plows the driveway or cut the lawn of an elderly neighbor. (The homeowners policies often exclude use of service vehicle if ever used off the resident's premises).

80-year-old Charlie needs some help getting dressed and eating. So his family helps him hire a part-time care provider to come into his home. He buys a small workers comp policy which includes employer's liability coverage, but he's not sure the policy has sufficient coverage.

You decide to rent [auto/boat/snowmobile/ATV] while you are vacationing outside the US. You want to be sure you have sufficient coverage in case you hurt someone or damage something.

You choose to rent a cabin for a wedding reception. You want to be sure there is coverage in case one of your guests gets injured.

The Results

In all above scenarios, since most homeowners or auto policies do not cover these items, you can be sure you have coverage with the right Umbrella policy. 

~ Jon

Motor Homes / Trailers

I just had a conversation with a friend who enjoys getting away with his family. Their pop-up camper gets lots of use. Then I came across this well-written article. Enjoy!

~ Jon

Merriam Insurance Agency

Insuring Liability Risks When 

Motor Homes or Trailers Are Used 

as a Secondary Residence

When trailers or motor homes are being used recreationally to explore from place to place, the auto policy that covers those vehicles covers liability for injuries and property damage to others, either in an automobile accident or while parked, as long as the injury or damage arose from the ownership, maintenance, or use of the vehicle. The auto policy covering the trailer, however, only covers the trailer while it is hooked up to the insured automobile pulling it. By contrast, the motor home policy covers liability arising from injuries or damage, whether it is being driven or parked. Neither policy covers liability when the vehicles are parked for injuries or property damage occurring on the site on which the vehicle sits. So where does one find that coverage?

by Jack Hungelmann

Your primary homeowners liability coverage does extend worldwide to your personal liability arising from those sites, if the site is rented on a daily or weekly basis. Examples include trailer parks and campgrounds. The homeowners liability coverage also extends to vacant sites that you own or rent long term. The policy defines "vacant" as free of structures, which means no sheds, docks, fences, outhouses, and trailers or motor homes semipermanently set on the site to serve as a residence.

Now the good news. For about $20 a year, you can get coverage for the site by adding an endorsement to your homeowners liability coverage. For about $10 a year more per million, you can extend your umbrella liability coverage as well. This is an inexpensive solution to a critical gap in coverage.

When Do You Extend Liability to an Owned Vacant Seasonal Lot?

I recommend that you extend coverage as soon as you buy the lot, even though it's vacant at the moment. Why? Because people have a way of doing things without notifying their insurance agent. They may add a dock or put up an outhouse. Or move a trailer onto the lot for the summer. If they do any of these things, add any structure whatsoever, they lose their homeowners liability coverage. Because the solution is so inexpensive in relation to the risk, I recommend adding it to the policy immediately upon purchase of the site. This follows a cardinal rule of risk management that I subscribe to: if coverage is uncertain and can be covered inexpensively by endorsement, always get the coverage. Or put another way, never rely on the generosity of an insurance company to pay a claim! Play it safe.

Illustrating the Problem

Paula and her husband have found a creative way of enjoying their motor home during this time of high gasoline prices. They have rented a trailer site on an annual basis on the banks of a beautiful southern Minnesota river. They park their motor home there year-round and use it much like you would use a cabin. One night, Paula and some of her neighbors are sitting around a campfire on their lot. The fire gets out of control, and one of the neighbors suffers third-degree burns over his chest and arms. He sues Paula and her husband for $1 million. They have no coverage: no defense coverage, no liability coverage. All they have for coverage is a standard unendorsed homeowners insurance policy.

The lawsuit settles for $500,000. The defense costs are $200,000. Paula and family are out of pocket $700,000, which could have been avoided with an inexpensive homeowners and umbrella endorsement for under $50 a year!

Happy camping!

---

Jack Hungelmann's book, Insurance for Dummies, contains much of this information and is available at your favorite bookstore or online. 

Used with Permission, Copyright 2012
International Risk Management Institute, Inc.